UBS fires trader, replaces him with computer algorithm

The testosterone-infused, Armani suited trader may be a symbol of investment banking prowess, but he costs a lot of money to employ, and in this difficult economy banks are leaving no stone unturned in the search for savings.

According to Bloomberg, UBS AG recently pink-slipped its head of credit default swap trading, a position that would have commanded an annual salary of $2-million or more prior to the financial crisis. But instead of bringing in another highly paid human, UBS apparently swapped the fellow for a computer algorithm.

It’s natural to push away from humans and large size to machines and small size . . . It’s been gaining momentum

“It’s natural to push away from humans and large size to machines and small size,” Peter Tchir, the founder of New York- based TF Market Advisors, told Bloomberg. “It’s been gaining momentum.”

The good news, according to the report, is that such systems are relatively inexpensive to build and maintain. On top of that, UBS’s system can “trade as much as US$250-million of the Markit CDX North America Investment Grade index or US$50-million on the speculative grade benchmark in one transaction.”